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A labor arbitrator, explaining his decision to award Boston firefighters significant pay raises, concluded that granting the city the right to begin what he called “groundbreaking’’ random drug and alcohol testing was worth an average of more than $2,000 annually in additional pay for the city’s 1,500 firefighters.

In a 23-page opinion released yesterday, arbitrator Dana Edward Eischen rejected the city’s argument that it should impose substance testing without a wage increase and laid out his rationale for awarding firefighters what amounts to a 19-percent wage increase over four years, a much richer package than the 14 percent given to other unionized city employees. Eischen pegged the value of the testing award at 2.5 percent of wages, effective at the end of next month, the day the contract runs out.

“I conclude that the city’s proposal to skim the frosting, pocket the cake, and avoid paying the fair, reasonable, and affordable value of the meal is a hound that will not hunt,’’ Eischen wrote. “To hold otherwise would ascribe zero value to a milestone drug and alcohol policy of enormous, lasting, and arguably ‘priceless’ benefit in terms of human lives of firefighters and members of the public saved or rescued.’’

Eischen contended that the package will cost the city $39.4 million in retroactive pay; the city says the award will cost $74 million in back pay and wages going forward.

The figures do not include savings the city will realize under the award for increased employee contributions for health insurance and tighter management control of sick leave.

City Hall’s higher estimate of the wage impact includes the increased cost of overtime at higher wage rates, retroactive payments to firefighters who retired during the past four years, and, under a formula won in a prior contract, longevity bonus increases that kick in with each of the five incremental wage increases called for in the contract.

In a statement, Mayor Thomas M. Menino called the cost of the decision “enormous.’’

“While we have some collective bargaining reserves set aside, we have not set aside enough to fund this decision,’’ he said. “Libraries, community centers, and other programs have been hit hard, and . . . we are struggling to find the appropriate way to support the extra expense.’’

During a press conference last night outside the union hall of Local 718 of the International Association of Fire Fighters, union president Edward Kelly called the compensation package a “just award’’ and said the city could have avoided arbitration in 2006.

“They chose instead to bully firefighters, and that is a hound that will not hunt,’’ Kelly said.

Kelly also lashed out at what he called “the spin of the Menino administration,’’ referring to the city’s contention that the new contract is unaffordable. And he said the contract’s drug and alcohol testing provision is a “positive step’’ that will allow city residents to take comfort in knowing that firefighters are “clean, sober, and ready to perform our duties.’’

The award now goes to the Boston City Council, which can vote to approve the arbitrator’s decision or reject it and send the city and firefighters back to the bargaining table.

Mayor Dean J. Mazzarella of Leominster, the management representative on the three-member arbitration panel, dissented on the economic aspects of the award, calling it “a slap in the face of the citizens of Boston.’’ He urged the Boston City Council, “to conduct an independent review of Arbitrator Eischen’s financial conclusions, because I do not believe they are accurate.’’

Mazzarella reiterated his assertion that Eischen and the third member of the panel — Robert McCarthy, president of the Professional Firefighters of Massachusetts — had approved the additional 2.5 percent pay increase at the 11th hour.

McCarthy, speaking at the press conference, disputed that, saying he had a “foot locker full of evidence’’ that proves that Mazzarella had ample knowledge of the raises over 26 days of hearings. “He is delusional, in my opinion,’’ McCarthy said.

The arbitrator’s decision is something of a victory for the firefighters union, which had been asking for pay and benefits equivalent to a 21 percent raise, and puts the city, which had initially offered a 14 percent salary increase, in a precarious negotiating position with other unions, such as those representing teachers and police, who received 14 percent raises over the same period and may now ask for more.

The decision, if approved by the council, would end a bitter, four-year contract dispute that had stalled over drug and alcohol testing, which the city wanted but firefighters had resisted without a significant pay increase in return. The firefighters union has endured significant criticism for its resistance after autopsy reports showed that two firefighters who perished in a restaurant fire in August 2007 may have been impaired.

“The union acknowledged such testing would be in the best interest of the parties, the employees, and the public,’’ Eischen wrote.

Boston police have a testing policy that requires officers to submit to a random test for drugs but not alcohol by providing a hair sample within one month of their birthday each year. The firefighters, under the new policy, could be tested at any time for both types of substances.

The testing program, which Eischen called “state-of-the-art,’’ sets forth in detail procedures, rehabilitation, and treatment options and a schedule of progressive discipline that can result in firing for multiple offenses.

In his ruling, Eischen rejected the union’s demand for a fifth contract year and delayed the final-year pay increase by six months. The pay package includes a hazardous duty-specialist pay increase of 3 percent.

The arbitrator compared police and firefighter compensation and calculated that the terms of the firefighters’ award will narrow the gap in compensation between the average firefighter and patrolman. By the end of next month, he wrote, firefighters on average would earn $59.34 per hour, compared with $60 for the average patrolman.